Whether where both parties had a reasonable argument costs were to be allocated by the rule of "loser pays" or to come out of the estate; whether costs ought to be allocated to the solicitor whose unfortunate error was responsible for the litigation; and how the court was to deal with the use of CFA's (Conditional Fee Agreements) in the Supreme Court

A solicitor who had drafted two wills ("the Solicitor") had visited Mr and Mrs Rawlings for the purpose of executing their wills. The couple had accidently been presented with, and each had signed, the will intended for the other. Thus the case involved a will which on its face, appeared to be the will of Mr Rawlings’s late wife (who had predeceased him), but it had been signed by Mr Rawlings. Mr Marley was the residuary beneficiary under the will, if it was valid, whereas the two sons of Mr and Mrs Rawlings ("the respondents") would have inherited on an intestacy.

In the Supreme Court, the respondents' solicitors and two counsel were each acting under a conditional fee agreement (a "CFA"), although they were acting on the traditional basis in the Court of Appeal and at first instance.

The issue that then arose was how the costs of the proceedings should be allocated.

The position disregarding the CFAs

Lord Neuberger stated that there was a case that Mr Marley should recover his costs from the respondents because they took their chance in hostile litigation and lost. Equally, there was a case for saying that the correct order was that the costs of all parties should be paid out of the estate, not least because the cause of the error was in the execution of the will, and the stance adopted by the respondents was far from unreasonable.

These submissions all had to be seen in the light of the fact that the value of Mr Rawlings's estate ("the estate") is in the region of £70,000.

Lord Neuberger stated the importance of noting the position of the Solicitor. There was considerable attraction in the notion that the Solicitor should bear all the costs, in the sense that it was the error of the Solicitor that caused the problem that gave rise to the proceedings. The insurers (of the solicitor) accepted liability to Mr Marley for his costs in the Court of Appeal and the Supreme Court. Further, when Mr Marley intimated that he had a claim against the Solicitor, the insurers required him to bring proceedings to seek to have the will upheld as valid.

Because an order that all parties be paid out of the estate would result in Mr Marley being able, in effect, to reconstitute the estate through a claim for damages against the Solicitor, the position was equivalent to one where the estate is very substantial in nature.

In those circumstances, rather than ordering that the parties receive all their costs out of the estate, and leaving it to Mr Marley to recover the costs from the Solicitor, and leaving it to the Solicitor to be indemnified by the insurers, Lord Neuberger stated that assuming that the respondents had funded the litigation traditionally, it would be appropriate to order that the insurers pay all the costs of Mr Marley and the respondents in relation to these proceedings throughout.

Such an order would therefore be appropriate in relation to the costs up to and including those incurred in the Court of Appeal. Lord Neuberger then considered what order was appropriate in respect of the respondents' costs in the Supreme Court, given that their solicitors and counsel were acting under CFAs.

The effect of the CFAs in the Supreme Court

Two issues arose. The first was whether the CFAs rendered the respondents liable for any costs in the Supreme Court. The second issue, which only arose to the extent that the answer to the first question is yes, was whether the costs that were to be ordered to be paid included any uplift.

Lord Neuberger continued the logic that costs should be covered directly from the insurer. He held that the insurer should cover counsel fees in the Supreme Court, but such coverage only applied to solicitor disbursements in connection with the appeal to the Supreme Court and not to the other solicitor costs.

Turning to the second issue of whether counsel fees should include the 100% uplift agreed in their CFAs,Lord Neuberger stated that he would be prepared to include base counsel fees in the scope of any order against the insurers, but was not prepared to include any uplift for counsel. He recognised that if he was to allow the respondents to recover their counsel's base fees from the insurers, the 100% uplift may very well either be recoverable from the respondents or from the solicitors. His view was that it would be quite wrong to permit this.

Lord Neuberger held that the right order to make in this case was that (i) the insurers of the Solicitor pay the costs of these proceedings (a) of Mr Marley up to and including the Supreme Court and (b) of the respondents up to and including the appeal to the Court of Appeal, and that (ii) the insurers of the Solicitor pay (a) the respondents' solicitor disbursements and (b) provided that both counsel for the respondents disclaim for all purposes the right to recover any uplift to which either of them would otherwise be entitled under their respective CFAs, counsel base fees, in relation to the further appeal to the Supreme Court.

The respondents' counsel formally confirmed that they disclaimed any entitlement which they may have had under their CFAs to uplift or success fees "for all purposes".

Had counsel not been prepared to provide such a disclaimer, Lord Neuberger would have made the order that the insurers pay the costs of these proceedings (a) of Mr Marley up to and including the Supreme Court, and (b) of the respondents up to and including the appeal to the Court of Appeal, and that there be no order for costs in the Supreme Court, save that the insurers pay solicitor disbursements.

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